OWNING YOUR OFFICE SPACE: FOUR TYPES OF PROPERTY TO CONSIDER
By Colin Carr, CEO Carr Healthcare Realty
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any healthcare professionals desire to own their office space. There are several reasons why: paying down principal and building equity with every payment, appreciation, additional tax benefits, not dealing with landlord negotiations every few years and more.
In many cities across the country, the number one factor in choosing the best property type for your practice is inventory and availability, seconded by cost. Additionally, your personal preference and quality of care you provide may not be represented in each property type or area. This can eliminate several or all remaining options. However, assuming you have a full slate of options to choose from, let’s look at the four main types of property that make the most sense for healthcare professionals: Stand-Alone Buildings Stand-alone buildings are defined as being the location of one owner/tenant. They typically offer excellent natural light and windows in all four directions. They provide signage that is not competing with other businesses sharing the same location and help practices stand out from the crowd. These buildings can be tucked away inside business parks or on a major thoroughfare with high traffic counts and visibility. Overall, stand-alone buildings can help create and strengthen a practice’s identity and are a very desirable asset. Office Condos Office condos are an excellent option for individuals who want to own office space but do not need a large building or have concerns about property management responsibilities. It can be very challenging to make the economics
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work when building smaller properties. Unlike building residential houses, the fees and costs of developing commercial real estate make it cost prohibitive to build structures that are only a few thousand feet. This results in fewer available stand-alone buildings under 5,000 SF. Whether the property was originally built as an office condo or was later converted, these allow users to purchase smaller sized spaces that best fit their requirements. Another benefit is that the majority are professionally managed. Smaller, stand-alone properties can make the expense of professional management more challenging as the cost can be disproportionate for just one owner. However, when you have larger properties that are divided into smaller units as condos, spreading out the cost of hiring a property manager becomes much more reasonable. Property managers direct the vendors that are required to keep a property running at its highest level, including: landscaping, exterior maintenance, fire and security monitoring, snow removal, insurance, janitorial and more. Multi-Tenant Buildings Many people are curious about the opportunity to own a building where they occupy one space but also have other tenants who help pay the operating costs and mortgage. While this approach can be desirable, it can also be very risky and expensive. Simply put, if tenants are in place and paying their rent, money is often available to offset the cost of owning and can create an additional income stream. However, you must also consider the alternatives. What happens when a tenant is not paying their rent and you need to evict them? Or what if a space goes vacant and it takes months or a year (or more!) to lease? Having a vacant commercial space typically costs thousands of dollars per month. Taxes, insurance and common area maintenance are charged on the